Fed Minutes Reveal Fed’s Thinking 3 Weeks Ago: Value Zero

Today we found out what the Fed thought nearly a month ago. What’s that worth?

Mainstream media wasted this afternoon analyzing Minutes of the March 20-21 FOMC Meeting.

Some of the conclusions were interesting. For example, the BBC reports Federal Reserve Eyes More Aggressive US Interest Rate Path.

The BBC claims “Some members of the Federal Reserve are urging the bank to consider raising interest rates more quickly, in what could mark a turn from its gradual approach in recent years.”

Slightly steeper?

“Almost all” participants agreed that a gradual approach to raising interest rates remained appropriate in the medium term, according to the minutes.

However, “a number of participants” said they expect stronger growth and inflation in the next few years, suggesting the path for interest rates “would likely be slightly steeper than they had previously expected”, according to the minutes.

Members also discussed the need to state “at some point” that its policies would likely move from trying to spur economic activity, to being neutral – or even a “restraining factor”.

Headline vs Reality

The question “Slightly Steeper?” is quite a bit of a variant from “Fed Eyes More Aggressive US Interest Rate”.

Beliefs the Same Today?

Those minutes are nearly a month old, more precisely, 22 days.

At best, we know what the Fed thought back then. More realistically, we know what the Fed wanted us to believe back then. That may be different that what they really did believe.

Even if we assume the minutes accurately reflect the overall Fed sentiment on March 21, is the Fed’s assessment unchanged?

Since then we have had numerous economic reports. Retail spending has declined three months in a row. The Atlanta Fed GDPNow model has real final spending, the true bottom line measure of GDP at 0.9%.

The threats of trade wars and real wars are unfortunately very real. Global economic growth estimates are falling.